LONDON MARKET CLOSE: Stocks limp into weekend ahead of partial reopen

(Alliance News) - It was a lacklustre end to a strong week for stocks in London as the UK is set to partially reopen on Monday but tourism stocks were unable to capitalise as normal travel levels still appear a ways away.

"It's been a solid week for UK stock markets with the FTSE 250 making new record highs, while the FTSE 100 managed to move above its early year peaks that we saw in January," CMC Markets Chief Market Analyst Michael Hewson said.

He continued: "Today's price action has seen a fairly low-key end to the week, characterised by some light profit taking ahead of the weekend, as the UK gears up for the reopening of non-essential retail stores, and pubs and restaurants outdoors next week."

The FTSE 100 index lost 26.47 points, or 0.4%, to close at 6,915.75, but gained 1.4% over the shortened week.

The mid-cap FTSE 250 ended the session 3.72 points higher at 22,251.26, staging a late rally to finish in the green and hit a new record closing high.

The AIM All-Share index closed 0.2% lower at 1,236.50.

The Cboe UK 100 index ended down 0.2% at 689.42. The Cboe 250 closed flat at 19,850.33. The Cboe Small Companies closed up 0.5% at 14,297.51.

"We've some modest weakness in travel and leisure stocks as it becomes apparent that a return to normal travel wise is likely to face significant barriers in the short term. The announcement of a new traffic light system for overseas travel which is set to start in May will in all likelihood mean that anyone contemplating a holiday in Europe may well not be able to do so, due to the low vaccination rates there," Hewson added.

Midcap airline easyJet lost 1.9%, while British Airways parent International Consolidated Airlines Group gave back 2.1%.

Budget airline Jet2 ended 5.3% lower after it said it will extend the suspension of all its flights due to "uncertainty" after the UK government refused to confirm whether foreign holidays will be permitted from May 17.

Announcing the findings of the Global Travel Taskforce, UK Transport Secretary Grant Shapps did confirm that a traffic light system will be used to categorise countries based on risk. He also said the government will work with the travel industry and private testing providers to reduce the cost of foreign trips.

In mainland Europe, the CAC 40 index in Paris ended 0.1% higher while the DAX 30 in Frankfurt advanced 0.2%.

Housebuilders had a strong session Friday as UK house prices hit record high levels in March buoyed by government support measures, the latest figures from Halifax showed.

Taylor Wimpey advanced 1.9%, Persimmon 1.4%, Barratt Developments 1.7% and Berkeley added 1.3%.

On an annual basis, house price growth was 6.5% in March, picking up from 5.2% in February. On a monthly basis, prices rose 1.1% in March.

The UK mortgage lender said average prices stood at GBP254,606 last month, higher than GBP251,697 in February.

The domestic housing market continues to find support from the UK government's extension of the stamp duty holiday and the new mortgage guarantee scheme.

Halifax Managing Director Russell Galley said: "Overall we expect elevated levels of activity to be maintained in the coming months, with consumer confidence spurred on by the successful vaccine rollout, and buyer demand still fuelled by a desire for larger properties and more outdoor space, as work-life priorities have shifted during the pandemic. A shortage of homes for sale will also support prices in the short term, as lower availability always favours sellers."

JD Sports Fashion was the best performer in the blue chip index, gaining 5.1% and Next gained 1.1%. The retailers were higher as lockdown restrictions are set to ease further in England on Monday with non-essential stores allowed to open until 2200 BST.

In addition, Berenberg hiked its price target on JD to 1,100 pence from 975p and reiterated its Buy rating. The bank said the sportswear retailer remains its top pick in the sector and demand for casual footwear is going unnoticed by investors.

At the other end of the large-caps, British American Tobacco ended the worst performer, down 2.5%, after JPMorgan downgraded the tobacco giant to Neutral from Overweight.

JPMorgan took a positive stance on Philip Morris International and was more downbeat on BAT over opposing prospects within heated tobacco.

PMI was 1.3% higher in New York.

JPMorgan's Jared Dinges said heated tobacco products are an integral part of the global nicotine industry's future as legislation, tighter regulation and social health consciousness puts pressure on traditional cigarettes.

In light of better-than-expected growth in 2020, despite limited in-person marketing, the analyst acknowledged that HTP has been gaining more traction than anticipated, especially in Central/Eastern Europe, at a time when vapor is slowing in Western countries and taking a step back in the US.

JPMorgan upgraded Philip Morris International to Overweight from Neutral saying the Marlboro cigarette maker is the "clear leader" in heated tobacco products with an 82% share and already makes profits will accelerate growth going forward, while BAT is still at the investment stage.

In the FTSE 250, PageGroup ended the best performer, up 11%, after the recruiter gave a bullish outlook for this year after its performance in March recovered to near pre-pandemic levels.

Page said it expects operating profit this year of GBP90.0 million to GBP100.0 million, up from the 2020 figure of GBP17.0 million. That's after a strong first quarter, with earnings in March up 31% year-on-year, and down only 2% from March 2019.

At the other end of the mid-caps, Tui was one of the worst performers, losing 2.1%. The Anglo-German travel operator said it has launched a bond offering worth EUR350 million, bolstering the balance sheet as it continues to navigate the Covid-19 pandemic.

The senior unsecured bonds convertible are due in 2028 and the offering may be upsized to EUR400 million, Tui said, and they will be issued with a coupon between 4.50% and 5.00% per year. They will be convertible into new or existing Tui shares.

"Tui intends to use the proceeds from the offering to further improve its liquidity position as the Covid-19 crisis continues and subsequently for the repayment of existing financing instruments," Tui said.

In January, Tui shareholders voted to allow the German state to take a stake of up to 25% in the company. Prior to that, the European Commission announced that EU competition watchdogs had approved the German state aid of up to EUR1.25 billion for the company.

The pound was quoted at USD1.3723 at the equities close on Friday, down from USD1.3739 at the close on Thursday, amid continued concerns over severe side effects with the AstraZeneca Covid-19 vaccine.

The euro was priced at USD1.1886, down from USD1.1903. Against the yen, the dollar was trading at JPY109.69, up from JPY109.25.

Brent oil was quoted at USD63.13 a barrel Friday evening, up from USD62.89 late Thursday. Gold was trading at USD1,743.30 an ounce, lower against USD1,754.40.

In the US, Wall Street was searching for direction, with the Dow Jones Industrial Average up 0.3%, the S&P 500 up 0.1% but the Nasdaq Composite was down 0.2%.

IG's chief market analyst Chris Beauchamp said: "It looks like a mixed end to the week following on from some US PPI data that was stronger than expected. Markets will once again have to revisit the topics of inflation and the Fed's response to it, bearing in mind the dovish Fed minutes from this week.

"The feeling of being in uncharted waters remains, since normally PPI data begins to strengthen towards the end of the cycle, as the Fed is already tightening, but we are generally assumed to be at the beginning of a cycle, and no Fed tightening is in sight. It looks like the message of 'no rate rises' is finally getting through, hence the recent halt in the rise in yields that has given space for sensitive assets like tech stocks and gold to rebound."

US producer prices accelerated in March as the economy reopens and the vaccination rollout continues apace, the latest figures from the Department of Labor showed Friday.

US producer prices for final demand in the rose 4.2% in March year-on-year, accelerating from a 2.8% increase in February. The latest reading beat market consensus, cited by FXStreet, of 3.8%.

On a monthly basis, producer prices rose 1.0% in March 2021, following a 0.5% increase in February and easily beating market expectations of a 0.5% advance.

Oxford Economics said: "Producer prices saw another powerful rise in March, again driven by surging energy prices and strengthening economic momentum. The fiscally stimulated revival of consumer demand and strong base effects will lead to faster annual inflation rates in the spring. However, these should be temporary dynamics, and we continue to expect the Fed to remain accommodative through mid-2023."

In the international economics events calendar next week, Monday is headlined by Japanese producer price index and eurozone retail sales, on Tuesday there is a Chinese and UK trade balance print, followed by the all-important US consumer price index in the afternoon.

On Wednesday, focus will be on eurozone production with Thursday headlined by German and French consumer price index readings. Friday has a GDP print from China and eurozone's consumer price index.

In the UK corporate calendar on Monday, estate agent Belvior, computer processor designer Concurrent Technologies and drug researcher Instem will issue full-year results.

By Paul McGowan; paulmcgowan@alliancenews.com

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